Computer giant Apple opened its first French store beneath the Louvre museum on Saturday just two weeks after Microsoft opened a theme cafe to promote its Windows 7 software.

Although Microsoft had a head start promoting its new Windows operating system in France, Apple (NASDAQ: AAPL) has placed its first store in a prized position in the bowels of the Louvre museum's "Carrousel" shopping center.

Both companies have large operations in France, according to Paul Jackson, an analyst with Forrester Research, but he said Apple in particular was looking to burnish its premium image with its new Paris site.

"It's more to do with the feeling of association with premium shopping than necessarily the market itself," said Jackson. He said France as a technology market tended to lag behind Britain and Germany, which already have Apple stores.

Apple's French expansion will take place against an uncertain economic background, with consumer spending in France still volatile and supported by government measures such as the car scrappage scheme.

But spending on must-have gadgets such as the Apple iPhone has proven robust. France Telecom has sold 1.3 million iPhones between November 2007 and September 2009, while new entrants SFR and Bouygues Telecom have sold around 200,000 iPhones since France Telecom lost exclusivity in spring.

"We are highly confident in the French consumer," Apple's head of retail, Ron Johnson, told Reuters at an event in Paris to launch the store.

Microsoft challenge

The Microsoft cafe, on Rue Sebastopol, does not actually sell any Microsoft products. It sells drinks and food and offers the chance to try out Microsoft's new Windows system, available ready bundled with new PCs or via upgrade.

A spokeswoman for Microsoft said the cafe would be open until the end of the year, with the possibility of keeping it open an extra few months into 2010.

Analysts say Apple may not suffer much from Microsoft's buzz, largely because iconic gadgets such as the iPod and iPhone have a "cool factor" that Microsoft software lacks.

"Microsoft has been lumbered with this image of being a global giant which keeps getting things wrong," said Robert Gregory, an analyst at research firm Planet Retail.

Apple launched its chain of retail stores in 2001 and now runs 273 stores around the world.

Microsoft recently followed suit and opened its first retail outlet in Arizona, with a second planned for California. It is Microsoft's second attempt at the retail business after a brief experiment with Sony in San Francisco's Metreon center a decade ago.

Analysts say these branded retail outlets are more marketing tools than growing sources of profit.
Planet Retail's Gregory said Apple's British operations, including its London store on Regent Street, made a loss in 2008 and might just break even this year, according to data from Companies House.

Apple does not officially break down results by country. In its most recent quarter, Apple stores generated $1.9 billion in revenue worldwide, the highest level ever.

"The main source of money for Apple and similar players are starting to come mainly from the online world than actually from the stores," said Saverio Romeo, an analyst with consultants Frost & Sullivan.

He cited Apple's recent announcement of over 2 billion downloads from its online application store. "It's a promising revenue stream, considering that it's just one year old."